The package of measures announced by Massa in recent days seeks to alleviate the harsh reality experienced by many small and medium-sized Argentine businesses, which after the last two rate hikes by the Central Bank find the cost of financing in the banks almost prohibitive. With bank credit in sharp decline, many SMEs continue to finance themselves with checks, but the cost of money is also increasing It affects your cash flows.
Check discounting is an operation in which a deferred check can be cashed instantly, without having to wait for the cash date. This allows the check recipient to receive payment early, without having to wait for the due date set in advance. Many cash-strapped businesses tend to fund themselves this way, as it allows them to do so make quick money.
Discount rates for deferred payment checks are not regulated by the Central Bank. That is to say, there are a range of options on the market in terms of the cost of this operation. However, the Leliq rate increase has some impact on the funding rate.
Now the discount rates on checks remain below the Badlar rate, which is the one that regulates bank loans, and which, after the latest adjustment by the Central Office, stands at a nominal 93% per annum. In a round of consultations with public and private banks, clarion found these rates to be between 70% and 75%. However, these levels, which appear “low” compared to inflation and the rest of the rates in the economy complicate SMEs.
To cite one case, discounting a $100,000 check at the bank incurs a cost that may be equivalent to $75,000. SME alone You receive 25% of the money you try to raise. “We drowned” they say.
Sebastián Alberio, Senior Manager of First Capital Group, said that “The increase in rates has a negative impact on the SME sector, all in all considering that, despite the fact that we find ourselves with high monthly inflation rates, the latest increases have been important and in a very short term of time This hampers the dynamics of the business and it paralyzes all the actors in the economy”.
Alberio highlighted that, within the capital market, there are still less onerous instruments for SMEs, even if the universe of companies that can choose to finance themselves on the stock exchange is more restricted.
“SMEs today have many options in the capital market to finance, above all, working capital (line of business), even if they do not escape the context. Now, the SME that does not have its financing “leg” in the capital market , has more difficulty depending only on the supply of banks,” he said.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.